What is Home Loan Pre-Approval?

Jason Coviello from Mortgage Choice Scarborough explains what pre-approval is and why you need to know the difference between a real one and a marketing tactic.

We love pre-approvals. Peace of mind, security, a streamlined process and confidence in negotiations are all a result of having a pre-approval already in place when you make an offer on that dream home.

But beware, not all pre-approvals are created equally. A large part of our job as your mortgage broker is to know the difference between the real deal, and an old fashioned marketing ploy.

There are two types of pre-approval, and the difference is in the way that the bank assesses your application, or more importantly, doesn’t:

Pre-approval in minutes!

Bank Manager: So are you currently employed?

You: Sure

Bank Manager: Excellent! and your income?

You: $80,000 pa

Bank Manager: Great! Any credit cards or debts?

You: Nope

Bank Manager: Congratulations on your pre-approval! We’ll just have to confirm everything once you sign a contract.

Don’t laugh, it happens.

You see, some banks will assess you for a pre-approval based only on a short conversation, and on what information you do, or don’t provide at the time. Of course this type of pre-approval isn’t worth the paper it’s written on. But while it might give you a false sense of security at the time, when it comes to gaining formal approval after you’ve committed to an offer you will wish you had a more detailed chat with the bank, or come to have a chat with us.

The Real Pre-Approval

Getting your pre-approval from a bank that asks for more than a first name is the only way to ensure you have peace of mind. The industry lingo for this is called a “fully assessed pre-approval”. To get to this stage you will generally need to provide evidence of your income (payslips), identification documents, details of current debts and living expenses.  

As your mortgage broker in Scarborough we’ll also sit down with you to make sure the loan product suits your future goals and won’t come back to haunt you later on. All this happens before the pre-approval, and this means minimum paperwork later. The bank will look at all the information, and with the supporting documents, make an assessment, and then issue a pre-approval.

What Does This Mean For You?

Having a fully assessed pre-approval means that you have confidence making your offer knowing that there isn’t going to be any hiccups with the finance.

But the best part……..

The paperwork is mostly done.

Generally, all that’s required is the contract of sale to gain a formal approval, then to sign the mortgage documents afterwards. That’s important considering you will be busy dealing with moving into your new home!

How You Can Spot the Difference

When it’s too good to be true, it probably is. If the bank offers to give you a pre-approval without even looking at a payslip or tax return, you know it’s too good to be true, and it won’t be a full pre-approval.

As your mortgage broker in Scarborough and Osborne Park it’s our job to know which banks offer a fully assessed pre-approval, and which ones fall short, and all the while making sure you get the loan to meet your needs.

If you want more information, or just to have a chat and see if I can help you gain a real pre- approval, please feel free to call me on 0413 938 848, or send me an email at jason.coviello@mortgagechoice.com.au. Or if you'd prefer to be social about it, feel free to get in touch here via my Facebook page!

 

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Posted in: Home loans

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